You can buy corporate bonds through a brokerage account, directly from a corporation, or through a bond fund — each route has different costs and minimum investments
Most individual investors buy corporate bonds through a brokerage account — the same type of account used for stocks. You log in, search for the bond by its ticker or CUSIP number, and place an order. The bond trades on the secondary market, meaning you are buying from another investor or a dealer, not directly from the company. This is the fastest and most flexible route for most people.
You can also buy directly from a corporation during a new bond offering, though this requires watching for announcements and moving quickly. Some corporations sell bonds through their investor relations website or through a bank acting as the underwriter. Direct purchases often have lower minimums than the secondary market and no trading fees, but you are locked into the offering price and terms.
A third option is a bond fund or bond ETF — a pool of many corporate bonds managed by a fund company. You buy shares of the fund rather than individual bonds. This spreads your risk across dozens or hundreds of bonds and requires a smaller initial investment, but you pay ongoing management fees and cannot control which specific bonds you own.
Key Takeaways
- Brokerage accounts are the most common way to buy corporate bonds on the secondary market, where you trade with other investors rather than the issuing company.
- Direct purchases from corporations during new offerings often have no trading fees and lower minimums, but you must act quickly when the offering is announced.
- Bond funds and ETFs let you own pieces of many corporate bonds with a smaller upfront investment, though you pay annual management fees.
- Each route has different costs: secondary market trades charge commissions or spreads, direct offerings charge nothing, and funds charge expense ratios.
- Your choice depends on how much money you have, how much control you want over individual bonds, and whether you prefer simplicity or lower fees.
Buying through a brokerage account on the secondary market
A brokerage account is a standard investment account you open with a firm like Fidelity, Charles Schwab, E*TRADE, or your bank's investment division. You fund the account with cash, then use that cash to buy bonds. The bonds you find there are already issued — they are trading between investors and dealers, not fresh from the company.
To buy a bond, you search by the company name, ticker, or CUSIP number (a nine-character identifier unique to each bond). You see the current price, yield, maturity date, and credit rating. You place an order just like buying a stock, and the trade settles in two business days. Your account holds the bond until you sell it or it matures.
The cost of buying on the secondary market includes a spread — the difference between the bid price (what dealers pay) and the ask price (what they charge). For corporate bonds, spreads typically range from 0.5% to 2% of the bond's value, depending on how actively it trades. Some brokerages also charge a flat commission per trade, though many have eliminated this fee in recent years. Check your brokerage's fee schedule before opening an account.
Minimum investments vary by brokerage and bond. Many firms require you to buy bonds in $1,000 increments, and some have account minimums of $10,000 or more. Highly traded bonds from large companies are easier to find and often have tighter spreads. Bonds from smaller or newer companies may be harder to locate and more expensive to trade.
Buying directly from corporations during new offerings
When a corporation issues new bonds, it announces the offering through financial news outlets and its investor relations website. The offering typically lasts a few days to a week. You can buy directly from the underwriting bank (usually a large investment bank like JPMorgan Chase or Goldman Sachs) or through a brokerage that participates in the offering.
Direct purchases have no trading fees or spreads — you pay the exact offering price set by the company and underwriters. Minimums are often lower than the secondary market, sometimes as low as $1,000 per bond. The trade-off is that you cannot negotiate price or timing; you buy at the offering price or not at all. Once the offering closes, you can still sell the bond on the secondary market, but you will then pay spreads and commissions like any other trade.
Finding new offerings requires active monitoring. The SEC's EDGAR database lists all bond offerings by public companies, and financial websites like MarketWatch and Bloomberg publish offering calendars. Your brokerage may also notify you of new offerings if you set up alerts. Acting quickly matters — popular offerings from strong companies can close within hours.
Buying through bond funds and ETFs
A bond fund is a mutual fund that holds dozens or hundreds of corporate bonds. A bond ETF is similar but trades like a stock on an exchange. Both let you own a piece of many bonds with a single purchase, spreading your risk across different companies and maturity dates.
You buy shares of the fund or ETF through a brokerage account, just like buying stock. The minimum investment is typically the price of one share, which might be $50 to $100. The fund manager handles buying and selling individual bonds, rebalancing the portfolio, and collecting interest payments. You receive distributions (usually monthly or quarterly) that represent your share of the interest earned.
The cost of owning a bond fund is the expense ratio — an annual percentage fee charged by the fund company. Corporate bond funds typically charge 0.3% to 1% per year, depending on whether the fund is actively managed or tracks an index. ETFs are often cheaper than mutual funds. You also pay a small trading commission when you buy or sell shares, though many brokerages have eliminated this fee.
Bond funds are simpler than buying individual bonds if you have a small amount to invest or want instant diversification. The downside is that you cannot control which specific bonds you own, and you pay fees even in years when the bonds lose value. If you want to hold a bond until maturity and collect predictable interest, individual bonds are usually a better choice.
Comparing costs across the three routes
| Route | Minimum Investment | Upfront Cost | Ongoing Cost | Best For |
|---|---|---|---|---|
| Secondary market (brokerage) | Usually $1,000 per bond | Spread (0.5–2%) + possible commission | None | Investors with $5,000+ who want specific bonds |
| Direct offering | Often $1,000 per bond | None | None | Investors who can act quickly and want no fees |
| Bond fund or ETF | $50–$100 per share | Small trading commission (often $0) | Expense ratio (0.3–1% annually) | Investors with less than $5,000 or who want simplicity |
The cheapest route depends on your situation. If you have $10,000 and want to buy five individual bonds, the secondary market spread might cost you $500 to $2,000 upfront, but you pay nothing after that. If you have $2,000 and buy a bond fund, you pay a smaller upfront fee but then pay 0.3% to 1% annually. Over five years, the fund's annual fees could total $30 to $100, which is less than the secondary market spread — but you also have no control over which bonds you own.
What to check before opening an account or placing an order
If you choose a brokerage, compare fee schedules across firms. Some charge per-bond commissions, others charge a flat fee per trade, and some charge nothing. Ask whether the firm charges fees to hold bonds or to receive interest payments. Check the minimum account balance and the minimum per trade.
For secondary market purchases, understand that bond prices move with interest rates. If rates rise after you buy, the bond's value falls (though you still get the full face value if you hold to maturity). If you need to sell before maturity, you may take a loss. Spreads are wider for less-traded bonds, so a bond from a small company may cost significantly more to buy and sell than one from a large company.
For direct offerings, sign up for alerts from the SEC's EDGAR database or your brokerage so you do not miss announcements. Offerings close quickly, and once they close, you can only buy on the secondary market at a higher cost.
For bond funds, read the fund's prospectus to understand what types of bonds it holds, how actively the manager trades, and what the expense ratio covers. Compare similar funds — two corporate bond funds may have very different holdings and fees.
Frequently Asked Questions
Can I buy corporate bonds directly from the company without a brokerage account?
Only during a new offering, and even then you usually go through the underwriting bank or a brokerage. A few large companies allow direct purchases through their investor relations website, but this is rare. For secondary market bonds, you need a brokerage account.
What is the difference between a bond fund and an ETF?
Both hold many bonds and charge annual fees. The main difference is that ETFs trade on an exchange like stocks (you can buy and sell during market hours at changing prices), while mutual funds are priced once per day after the market closes. ETFs typically have lower expense ratios and smaller minimum investments.
Do I have to hold a corporate bond until maturity?
No. You can sell any bond on the secondary market before maturity. If interest rates have risen, you will sell at a discount (below face value). If rates have fallen, you will sell at a premium (above face value). You pay a spread when you sell, just as you did when you bought.
Why do corporate bond prices vary between brokerages?
Different brokerages have different dealers and different inventory. One firm may have a bond in stock and offer a tight spread, while another has to source it from a dealer at a wider spread. Shop around before buying, especially for large purchases.
Is a bond fund safer than buying individual bonds?
A bond fund spreads your risk across many bonds, so one company's default hurts less. But the fund's value still moves with interest rates and credit conditions, and you pay ongoing fees. Individual bonds are safer in the sense that you know exactly what you own and get the full face value if you hold to maturity — but you have less diversification.